Suppose That Australia Imposes a Tariff on Imported Computer Chips

question 103

True/False

Suppose that Australia imposes a tariff on imported computer chips.If the increase in producer surplus is $100 million, the increase in tariff revenue is $200 million and the reduction in consumer surplus is $500 million, then the deadweight loss of the tariff is $200 million.

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Definitions:

Marginal Cost

The supplementary expense incurred by fabricating one more unit of a product or service.

Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain constant.

Cobb-Douglas Production Function

Production function of the form q = AK^aL^b, where q is the rate of output, K is the quantity of capital, and L is the quantity of labor, and where A, a, and b are constants.

Optimal Input Demands

The combination of inputs that minimizes the cost of producing a given output or maximizes output for a given cost.